Professional Tax Registration & Compliance Filing

​​1. What is Professional tax and who levies it?

The nomenclature ‘Professional tax’ could be one of those terms which do not completely convey the real meaning of the term. Unlike the name suggests, it is just not the tax levied only on professionals. It is a tax on all kinds of professions, trades, and employment and levied based on the income of such profession, trade and employment. It is levied on employees, a person carrying on business including freelancers, professionals, etc., subject to income exceeding the monetary threshold if any.

As per Article 246 of the Constitution of India, only Parliament has the exclusive power to make laws with respect to Union List which includes taxes on income. The state has the power to make laws only with respect to the Concurrent and State list. However, professional tax though is a kind of tax on income is levied by State Government (not all states in the country chose to levy professional tax). State Government is also empowered to make laws with respect to professional tax though being a tax on income under Article 276 of the Constitution of India which deals with tax on professions, trades, callings and employment.

It may be noted that professional tax is a deductible amount for the purpose of Income-tax Act, 1961 and can be deducted from taxable income.

​​2. Professional Tax Rate

Professional tax being levied by the State Government, is different in different states. Every state has its own laws and regulations to govern professional tax of that particular state. However, all the states do follow slab system based on the income to levy professional tax.

Further, Article 276 of the Constitution which empowers the State Government to levy professional tax also has provided for a maximum cap of Rs 2,500 beyond which professional tax cannot be charged on any person.

Few illustrative slabs in the country

Professional tax rate slabs in Karnataka

​​3. Who is responsible to collect and pay professional tax?

Professional tax is collected by the Commercial Tax Department. The commercial tax department of the respective states collect it which ultimately reaches the fund of municipality corporation.

Person responsible to pay professional tax

In case of employees, an employer is a person responsible to deduct and pay professional tax to the State Government subject to the monetary threshold if any provided by respective State’s legislation. Additionally, employer (corporates, partnership firms, sole proprietorship etc) also being a person carrying on trade/profession is also required to pay professional tax on his trade/profession again subject to the monetary threshold if any provided by respective State’s legislation. In such case, the employer needs to register and obtain both professional tax registration certificate to be able to pay professional tax on his trade/profession and professional tax enrolment certificate to be able to deduct the tax from his employees and pay. Further, separate registration may be required for each office depending on the respective State’s legislation.

Persons who are carrying on freelancing business without any employees are also required to register themselves subject to the monetary threshold if any, provided by the respective State’s legislation.

However, a professional tax levy is subject to the exemption provided by the respective State to certain categories. For example, parents or guardian of any person who is suffering from mental retardation, blind persons are exempted among others from levy of Karnataka Professional tax.

• What is professional tax and when is it levied?

  Professional tax is a state level tax which is imposed on income earned by way of profession, trade, calling or employment. The tax is based on slabs depending upon income of individual who may be self employed or working as employee of an entity. At present the maximum tax that can be imposed is restricted to is Rs. 2500/-.

• What is enrolment certificate and what is registration certificate?

  Every employer in specific states is required to deduct taxes from salary when paid to one or more employees when payment made exceeds Rs 5000(this limit is for Maharashtra) and deposit with state government. That entity is required to obtain registration certificate. When person is employed in profession by two or more employers and is getting salary/wages exceeding Rs. 5000 but employer is not deducting professional tax then the individual needs to get enrolment certificate from authority.

• Is Professional tax imposed in every state in India?

  Professional tax is imposed only in following States: Karnataka, Bihar, West Bengal, Andhra Pradesh, Telangana, Maharashtra, Tamilnadu, Gujarat, Assam, Kerala, Meghalaya, Odisha, Tripura, Madhya Pradesh, and Sikkim.

• Who is responsible for deducting the tax and depositing the same with Government?
  • In case of individuals who are self employed the tax has to be paid by the individual himself
  • In case of employed individuals, the liability is on the employer
• Can the professional tax liability amount be paid in lump sum?

  In certain states there is concept of composition scheme. For e.g. in case of Maharashtra, the government announced composition scheme under which any person liable to make payment to government at rate of Rs. 2500 may make a lump sum payment in advance of Rs. 10,000 and his liability to pay for 5 years will be discharged.

• What will be the other costs in the registration process?

  The plan price covers all professional fees and convenience charge. Since Professional tax is state level tax the applicable govt. charges vary from state to state.

  Government charges will be charged on actual basis..

• Is there any exemption from PT payment?

  Every state has its own governing provisions and exemption criteria. For example Karnataka PT act, has given exemption to certain persons from payment of PT. All charitable and philanthropic hospitals or nursing homes situated in places below the Taluk level in all districts of the State except Bangalore and Bangalore Rural District. Directors of Companies registered in Karnataka and nominated by the financing agencies owned or controlled by the State Government or by other statutory bodies. Foreign technicians employed in the State provided their appointments are approved by the Government of India for the purpose of exemption from payment of income tax for the said period ( exemption is for a period of 2 years from the date of their joining duty). Combatant and civilian non combatant members of the Armed Forces who are governed by the Army Act, the Navy Act and the Air Force Act. Salaried or wage earning blind persons. Salaried or wage earning deaf and dumb persons. Holders of permits of single taxi or single three wheeler goods vehicle. Institutes teaching Kannada or English Shorthand or Typewriting. A Physically handicapped person not less than 40% of permanent disability (subject to production of certificate from the HOD of Government Civil Hospital). An ex-serviceman not falling under Sl No.1 of the Schedule. A person having single child and who has undergone sterilization operation, subject to production of a certificate from the District Surgeon, Government Civil Hospital, for having undergone such operation. Central Para Military Force (CPMF) Personnel. Persons running educational institutions in respect of their branches teaching classes up to twelfth standard or pre-University Education. No tax is payable by persons who have attained age of sixty five years. Also no tax is payable for holding any Profession for less than 120 days in the year. Our experts will guide on on applicability of the provisions.

• Which are the specific cities where the service will be delivered?

  The service is state specific in case you need a shop license and will be rendered only in specific cities being Mumbai, Gurgaon, Hyderabad, Kolkata, Jaipur, Surat, Bangalore, Chandigarh, Pune and Delhi.